The Rise of Tenant Unions

Mercedes Shaffer l Broker l Published in AOA Magazine

Tenant unions, once a niche movement, are now a powerful force across California. Fueled by rising housing costs, a widening income gap, and social media-driven activism, these unions are rallying renters to push for tighter rent controls, stricter eviction protections, and more expansive tenant rights. As they gain momentum, tenant unions are also driving a narrative that portrays housing providers as greedy and exploitative, creating a divisive "us versus them" mentality that can have real financial consequences for property owners.

The Impact on Property Values and Rents

As tenant unions grow in power, the financial landscape for property owners is changing. Here’s how this shift is likely to affect the California rental market in cities where local rent controls continue to expand:

Suppressed Rent Growth

Tenant unions are aggressively lobbying for more restrictive rent control policies, limiting the ability of owners to raise rents in line with market rates. Housing providers are already feeling the financial strain, and over time, the gap between rental income and fair market value will only widen, making it harder for owners to keep up with inflation and maintenance costs.

Depressed Property Values

In markets where rent control is prevalent, property values often stagnate or decline as they are determined by income and cash flow. Investor interest in these areas diminishes due to decreased profit potential and higher regulatory risks. If California continues down this path, property owners could see significant reductions in their asset values.

Increased Compliance Costs

Strong tenant unions also push for regulations that impose additional costs on property owners, such as mandatory improvements, tenant concessions, and lengthy legal battles. These added expenses can erode profitability and make it difficult for owners to maintain their properties.

Learning from New York: A Cautionary Tale

New York City offers a stark warning for what could happen in California if tenant unions continue to grow unchecked. Over decades, tenant unions in New York successfully lobbied for some of the nation’s most restrictive rent control laws, leading to severe consequences.

Rigid Rent Controls

New York’s rent stabilization laws cap rent increases well below market rates, resulting in stagnant rental income for property owners. In many cases, housing providers are forced to operate at a loss or neglect necessary property upgrades due to the lack of financial incentive.

Public Hostility Toward Housing Providers

In New York, the public narrative is heavily skewed against property owners, who are often portrayed as exploitative. This perception has made it increasingly difficult for housing providers to advocate for balanced policies, as public sentiment and political will overwhelmingly favor tenant protections.

Investor Flight and Declining Property Values

As rent control policies have tightened, many investors have pulled out of New York, leading to depressed property values in rent-stabilized areas. This exodus has stifled innovation and investment in housing, leaving behind a less competitive market.

Conclusion

If California follows New York’s lead, property owners could face a similar environment where tenant unions hold significant influence, and the economic realities of running a rental business are sidelined in favor of tenant-friendly policies. To navigate this evolving landscape, property owners must take proactive steps to protect their investments by engaging in advocacy and policy discussions with local government officials and city council members. The rise of tenant unions in California is a growing challenge that housing providers cannot afford to ignore. As these groups gain influence and public sentiment increasingly supports tenant-friendly policies, property owners must prepare for a more regulated and contentious environment. By learning from cities like New York, where tenant activism has led to long-term market shifts, California owners must take proactive steps to protect their investments, adapt to changing conditions, and maintain profitability while navigating this complex landscape.

Mercedes Shaffer is a multifamily real estate agent with REAL Broker, and If you have questions about buying, selling or doing a 1031 exchange, her  team serves LA and Orange County and can be reached at 714.330.9999, InvestingInTheOC@gmail.com, or you can visit their website at InvestingInTheOC.com  DRE 02114448